The Case for Medicare Reform

Chris Jacobs /
July 22, 2013

Newscom

The panel meets in secret, is controlled by special interests, and helps determine the allocation of nearly $100 billion in federal health care spending.

Is it some clandestine panel created by Obamacare? Hardly. It’s a panel controlled by the American Medical Association (AMA)—and, as The Washington Post reported in a front-page article yesterday, it has been micro-managing the way Medicare pays physicians for nearly a quarter-century.

The panel is just one part of the complex bureaucratic machinery that sets Medicare physician payment enacted by Congress in 1989. Instead of payment set by the free market forces of supply and demand, the panel assigns “value” to different medical procedures. So, in theory, a doctor performing an hour-long surgery should be paid four times as much as a physician undertaking a 15-minute procedure.

In practice, however, the process is far from straightforward. As the Post article demonstrates, the panel operates with virtually no public transparency, little government oversight, and a structural bias toward specialty physicians over primary care procedures. Curiously, in 1989 one of the arguments advanced for this payment system is that it would rectify the bias against primary care doctors.

Worse than the inaccuracies in the current payment system is the premise underlying it: That the Medicare bureaucracy and its group of “experts” can determine the “right” price of nearly every service performed by physicians nationwide.

Later this afternoon, the House Energy and Commerce Committee will begin its markup of Medicare physician payment legislation. While the legislation would revamp the process for setting Medicare reimbursements, as a Heritage Backgrounder released last week demonstrates, it does not represent fundamental reform of the Medicare program. Instead, many of the same medical specialty societies that have abused the current rate-setting process would receive new powers to control patient care—by setting guidelines that physicians must follow and cutting doctors’ pay if they do not.

True reform of the Medicare program would use a premium support system and market forces to unleash competition that will drive down health costs. Getting the federal government out of the price-control business would allow innovative reimbursement solutions to take root.

This is the issue:… whether we believe in our capacity for self-government or whether we abandon the American Revolution and confess that a little intellectual elite in a far-distant capital can plan our lives for us better than we can plan them ourselves.

When revamping Medicare physician payment, Congress has the opportunity to take power away from that “little intellectual elite” and should not hesitate to do so. And, rather than attempting to empower other bureaucratic entities to micromanage the health system, it should return that power back to the place where it belongs—with the people themselves.